BRIDGE THE GAP
For internal use only
This session covered best practices for handling buyer representation and compensation in real estate transactions. The speaker emphasized flexibility and open forum discussion, where agents can share experiences and strategies. A key focus was on explaining and negotiating buyer-agent compensation, including potential gaps when sellers don't cover the full amount. Agents were encouraged to present the process clearly to clients, using analogies like "out of network" costs from insurance to explain compensation gaps.
The importance of discussing compensation in the offer phase, utilizing specific forms like the BRBC and SPBB, was highlighted, along with strategies to close compensation gaps through negotiation, such as increasing the offer or requesting seller concessions. The class also stressed the need for agents to continually refine their communication and negotiation tactics as the market evolves. The session wrapped up with advice on handling compensation changes, ensuring clients understand all aspects of the process without feeling overwhelmed.
Here are 3 Actionable steps you can take today to implement the strategies from this training:
1. Attend "Contracts with Kelli" to Master Forms Like BRBC and SPBB
Understanding how to properly fill out and use the Buyer Representation Agreement (BRBC) and Seller Payment to Buyer Broker (SPBB) forms is essential. Attending "Contracts with Kelli" will provide you with the in-depth knowledge needed to navigate these forms confidently, ensuring your compensation is protected in every transaction.
2. Join Roleplay Sessions on Thursdays at 10 AM to Practice Negotiation Skills
Negotiating compensation gaps and seller concessions requires practice. Attend the Thursday roleplay sessions to rehearse scenarios where you explain compensation to buyers and negotiate terms with sellers. This will help you refine your communication techniques and develop confidence in handling real-world situations.
3. Start Proactively Discussing Compensation with Your Buyers
Begin implementing what you’ve learned by having open, clear conversations with your buyers about compensation. Use the strategies discussed in the training, like explaining compensation gaps in simple terms or using analogies. Setting the right expectations with buyers early on can help avoid misunderstandings and ensure smoother negotiations later.
These actions will help you strengthen your knowledge, sharpen your skills, and apply these best practices in your real estate transactions right away.
5 Takeaways
1. Understand and Clearly Explain Buyer-Agent Compensation
It’s crucial to communicate the details of buyer-agent compensation to your clients in simple, relatable terms. Use analogies like "out-of-network" costs in insurance to explain compensation gaps and make sure buyers understand that they won’t be writing you a check—any compensation gaps will appear as a line item in their closing statement.
2. Utilize the BRBC and SPBB Forms Correctly
Ensure that the Buyer Representation Agreement (BRBC) and Seller Payment to Buyer Broker (SPBB) forms are properly filled out and included in your offer. The BRBC outlines the agreement between you and the buyer, while the SPBB formally requests the seller to pay the buyer-agent's compensation. These forms are essential for protecting your compensation rights.
3. Negotiate Seller Credits During Inspections
If the seller offers less than the agreed-upon compensation, you can attempt to negotiate credits during the inspection phase to cover the gap. This allows you to potentially cover the buyer-agent’s compensation while also addressing any repairs or issues with the home.
4. Be Flexible, But Know Your Value
While flexibility in compensation might be needed in certain scenarios, don’t be too quick to lower your commission. Instead, explore options like increasing the buyer’s offer to cover the gap or negotiating for additional seller concessions. Clearly communicate your value to the buyer and advocate for fair compensation.
5. Be Prepared for Changing Compensation Rules
The real estate market is evolving with new rules and settlement guidelines, especially around agent compensation. Stay informed on the latest regulations and be ready to navigate negotiations involving compensation gaps. Use these changes as opportunities to refine your negotiation and communication skills, ensuring you're well-equipped for future transactions.
FAQs
1. What should I say to a buyer when presenting the Buyer Representation Agreement (BRBC)?
When presenting the BRBC, explain that it outlines the duties, expectations, and compensation between the buyer and the agent. Make it clear that the compensation is negotiable and that your goal is to have the seller cover your compensation as part of the offer.
2. What if the seller doesn’t agree to cover the full compensation for the buyer’s agent?
If the seller offers less compensation than agreed upon in the BRBC, this creates a "gap" in the buyer-agent compensation. You can negotiate with the seller to cover the gap or ask for seller concessions. If that fails, you may need to modify the compensation agreement with the buyer.
3. How can I explain a compensation gap to my buyer?
Use simple analogies like "out-of-network" costs from insurance to explain the gap. Let the buyer know that if they choose a home where the seller offers less compensation, they may need to cover the difference out of pocket, but this will be part of their closing costs, not a separate check.
4. Can I modify the BRBC if the seller doesn’t offer enough compensation?
Yes, you can modify the BRBC using the Modification of Terms form. However, it’s advisable to specify that the modification applies only to the current transaction, rather than altering the overall agreement.
5. What is the SPBB form and when is it used?
The SPBB (Seller Payment to Buyer Broker) form is used to formally request the seller to cover the buyer’s agent’s compensation as part of the offer. This form should be included with the offer and confirmed during negotiations.
6. What happens if the SPBB form is not signed or included in the offer?
If the SPBB is not signed, the buyer may be left responsible for covering the agent’s compensation. It’s important to ensure this form is acknowledged and signed during negotiations to avoid issues before closing.
7. Can I negotiate credits during inspections to cover compensation gaps?
Yes, you can negotiate seller credits during inspections to cover the compensation gap. This approach allows the buyer to receive concessions for repairs or other issues, which can offset the remaining compensation balance.
8. What if the house is in perfect condition and the seller refuses to offer credits?
If the seller doesn’t agree to cover the gap through credits, you may need to modify your terms or discuss with the buyer if they are willing to cover the difference. In some cases, the buyer may be okay with this as part of the closing costs.
9. Can I increase the offer to cover the compensation gap?
Yes, you can increase the buyer’s offer price to cover the gap. For example, if there’s a $5,000 gap, you might increase the offer by that amount and request the seller cover the full buyer-agent compensation. This way, the buyer finances the gap through their mortgage.
10. Should I lower my compensation to close the deal?
Lowering your compensation should be a last resort. First, explore other negotiation tactics like seller concessions or adjusting the offer. Make sure the buyer understands your value and the work you’ve done on their behalf before considering a reduction in compensation.
11. What happens if a seller doesn’t disclose their compensation offer up front?
If the seller doesn’t disclose compensation details in the MLS, you may need to ask them directly or include your compensation terms in the offer. Be sure to confirm these details through negotiation and include them in the counteroffer if necessary.
12. Can I be flexible with compensation when working with repeat clients?
Yes, if you have a long-standing relationship with a client, you may choose to be more flexible with your compensation terms. However, be cautious when modifying the BRBC and ensure it’s limited to the specific transaction at hand.
13. What if the buyer doesn’t want to sign an exclusive agreement?
Explain to the buyer that an exclusive agreement ensures you are fully committed to helping them, and you expect the same in return. Reassure them that if you fail to deliver on your promises, they can terminate the agreement using the cancellation form.
14. What if the seller offers less than 2.5% compensation?
If the seller offers less than 2.5%, you can negotiate or modify the BRBC terms for that specific transaction. Be sure to address this in the SPBB and adjust the offer if necessary to ensure the compensation aligns with your agreement.
15. Can I still accept an offer if the seller offers less than the standard commission?
Yes, you can still accept the offer, but it’s important to have a conversation with your buyer about the compensation gap. Use forms like the SPBB to negotiate or adjust the offer to ensure you are fairly compensated.
